Roku has made official what’s been rumored: It wants to go public.
The digital media player maker publicly filed its S-1 with the Securities and Exchange Commission on Friday – the first big step for a company seeking an initial public offering (IPO) of its shares.
The company plans to list shares on the Nasdaq stock exchange under the ticker “ROKU.”
Roku sells inexpensive boxes that allow consumers to stream Netflix, YouTube and other streaming video services to their televisions. It also offers its software to other consumers electronics makers that want to use it as the interface for their smart TVs.
Although the company is losing money, its revenue is growing fast as cord-cutters and other consumers snap up its devices, the cheapest model of which sells for $30. In the first half of 2017, Roku posted revenue of $199.7 million, up 23% from the same period in 2016, according to the S-1 filing. In fiscal year 2016, it had a total of $398.6 million in revenue, up 25% from 2015.
Roku did not specify how many shares it planned to sell, or the price of the shares. The Wall Street Journal reported in July that Roku was seeking an IPO valuation of roughly $1 billion.
Althought Roku said in the filing that it seeks to raise as much as $100 million through the stock sale, that number is just a placeholder and is expected to change as the date of the IPO draws closer.
Roku intends to set up a dual-class stock structure, which will give more power to pre-IPO investors than new ones. That will make it easier for current shareholders, including its CEO, to retain control after the public offering. Existing investors will get a new class of stock that will give them 10 votes for every share they own. By contrast, shares sold in the public offering will give investors who own them one vote per share.
This model has been increasingly common as tech companies go public. Google and Facebook both have similar stock structures. But the practice has been controversial, because it can insulate founders and other insiders from legitimate shareholder concerns.
Billions of streaming hours
As of June 30, Roku had 15.1 million active accounts on its service, according to the filing. Customers using Roku devices or TV’s with its interface streamed 6.7 billion hours of internet video in the first half of 2017 – up 62% from the same period in 2016, the company said in the filing.
- SEC filing
Currently, most of Roku’s revenue comes from the sale of the streaming devices, but the company plans to increase its number of active users and grow the amount of revenue per user. Each active user is currently worth $11.22 to the company – up from $9.28 in 2016, and $6.48 in 2015.
More active users means more platform revenue, which is a mix of advertising sales, streaming subscriptions, and licensing arrangements. These licensing agreements consist of a series of partnerships Roku has made with TV makers, such as Haier and Chinese heavyweight TCL. Roku provides a blueprint that lets TV makers bake Roku’s technology, including its slick operating system, into its smart TVs in return for a licensing fee.
Despite this growth, Roku is still losing money. Since 2002, the company has incurred a total deficit of $244 million. It lost $24.2 million in the first half of 2017.
And the company faces some significant risks, chief among them the possibility that content providers like Netflix and Hulu could stop licensing Roku their content.
About one third of the time the total hours that Roku users streamed video on its boxes last year was spent watching Netflix. Roku said it is currently in the final year of its Netflix licensing deal and that it expects the deal to be renewed – but there’s no guarantee.
The Los Gatos, California, company has been rumored to be moving toward an IPO since July, when it hired Morgan Stanley and Citigroup as underwriters.
Roku was expected to move toward an IPO in 2014, but it never materialized.